The ‘power of three’ instead of sustainability indices
June 14, 2011
There is a lot of discussion on the impact of sustainability indices and guidelines. Many believe these can be a powerful tool for increasing awareness about the importance of sustainability and that they add to competition among organizations. Companies are eager to score well in indices, so they put up their best face.
Personally, however, I believe the time has come to ditch these indices. Instead, we should dramatically increase our focus on what really matters. I propose that every company communicates its three most important (material) sustainability issues and makes sure that these are not only managed intensely, but that progress is a management priority. I will call this kind of focus the ‘power of three’.
What’s the problem with the current situation? Sustainability has evolved into a ‘virtual reality’, one that has too little to do with true progress and with changing the management agenda. Companies, NGO’s, and the other stakeholders are putting ratings central on their agenda. Ratings, however, do not necessarily reflect the business reality. Worse: they generally cover an almost unlimited number of items capturing sustainability in the broadest sense. The more items are included, the greyer the outcomes they generate. Often, companies diligently fill out detailed questionnaires after which raters add some hocus pocus in a process that is little transparent. Top management of companies is not really interested; it just wants to get to best possible score, leaving it to staff departments to deal with all the paperwork and politics. Am I too skeptical? Why then do mainstream investors, ironically, not really care about this niche?
What would be better? If every company identifies publicly its three most material sustainability aspects, top management will focus on results. Some examples: for a brewer, what is important is water efficiency, supply chain management (incl % local sourcing) and public health. For a bank, what is important is: (risk)management of sensitive sectors, talent management, sustainable finance as percentage of loan book. For a chemical corporation: co2 reduction, innovation, health & safety. Let companies decide for themselves. Of course stakeholders can then challenge them, but it is certain that the three items are top management priorities. The objective is to be the best in the market. It is not about PR, but about staying ahead of the competition. This way, sustainability performance also becomes a top priority for investors, as it impacts future cash flows. Focusing on less would strengthen the sustainability agenda.
Why is this not (yet) happening? The ‘virtual reality’ suits a lot of players well. Not least the rating agencies, but also corporations and NGO’s. Being able to hide the dilemmas and challenges of sustainability behind the mask of questionnaires and ratings makes life easier. Companies that score well want to hold on to the status quo.
I believe it is time for a new phase in the evolution of the ‘sustainability eco system’. By increasing our focus, we will increase progress. Do you agree that the ‘power of three’ can accelerate the transition towards a more efficient and sustainable economy?
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